Latvia: GDP expands at fastest pace since Q4 2007
September 8, 2011
In the second quarter, GDP expanded 5.6% over the same period last year, according to revised data published on 8 September by the Statistics Office. The reading was above the 3.5% increase observed in the first quarter and was revised up from the 5.3% increase previously reported in the flash estimate. The second quarter expansion represented the fourth consecutive quarter of positive growth and the fastest pace of expansion since the last quarter of 2007. The second quarter result reflected faster growth in both private consumption (Q1: +3.6% year-on-year; Q2: +4.4% yoy) and government consumption (Q1: +0.6% yoy; Q2: +1.3% yoy). In addition, gross fixed investment remained buoyant in the second quarter, expanding 21.7% in the second quarter (Q1: +28.6% yoy). Meanwhile, the net contribution from the external sector to overall economic growth improved, with exports of goods and services expanding 15.0% in the second quarter, slightly up from the 14.7% increase tallied in the first quarter. In contrast, imports decelerated slightly from a 22.6% increase in Q1 to expand 22.1% in Q2. As a result, the net contribution improved from minus 5.0 percentage points in Q1 to minus 4.3 percentage points in Q2. At the sector level, the second quarter expansion reflected strong growth in industry (Q1: +5.6% yoy; Q2: +8.9% yoy) and services (Q1: +3.8% yoy; Q2: +4.9% yoy), while agriculture decelerated over the previous quarter. A quarter-on-quarter comparison confirms the strong print suggested by the annual figures, as GDP grew a seasonally adjusted 2.0% over the previous quarter, above the 1.1% increase tallied in the first. In its July macroeconomic report, the Central Bank maintained its growth projections and anticipates the economy to expand 3.3%.
Author: Ricardo Aceves, Senior Economist